Politics

$35 Trillion Worth Of Oil And Gas In The Artic Up For Grabs

From sticks and stones to nerve agents and nukes, there is nothing, absolutely no other endeavor that humans have worked on with such dedication since the dawn of time – which has seen so many resources invested upon, money thrown to develop, invent, and innovate – as the art of killing their fellow human beings with greater efficiency.

belarus kazakhstan and ukraine
janrye / Pixabay

There is an old axiom “to have peace, prepare for war”. Simply put, no one wants to fight the strongest man around, or nothing makes one feel safe as possessing the biggest and baddest weapons in the neighborhood.

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Nuclear Bombs in all their horrendous glory are the ultimate weapons; they can kill more people in a larger geographical area from a further distance than anything else. The potential for devastation is of such a magnitude that they have only been used twice in all history.  Today, the U.S. and other Western powers are prepared to go to war to prevent their proliferation.

However Nukes are also the ultimate deterrents. Possessing a nuke means not having to worry about conventional warfare on your own soil. There are a total of eight countries* which possess these weapons, and not one of them has ever been attacked in the conventional sense since they came to possess nukes. It simply isn’t worth the risk to attack these countries.

So back in 1994, one wonders, why three former members of the Soviet bloc – Belarus, Kazakhstan, and Ukraine - agreed to voluntarily give up this deterrent of deterrents? Especially since the possibility that their former co-citizens could have second thoughts about losing, especially in the Ukraine, what amounts to choice strategic real-estate.

“The Budapest Memorandum:  According to the memorandum, Russia, the US, and the UK confirmed, in recognition of Belarus, Kazakhstan and Ukraine becoming parties to the treaty on the non-proliferation of nuclear weapons and in effect abandoning its nuclear arsenal to Russia, that they would:

  1. Respect Belarusian, Kazakh and Ukrainian independence and sovereignty and the existing borders.
  2. Refrain from the threat or use of force against Belarus, Kazakhstan and Ukraine.
  3. Refrain from using economic pressure on Belarus, Kazakhstan and Ukraine in order to influence its politics.
  4. Seek immediate UNSC action to provide assistance to Belarus, Kazakhstan and Ukraine, "if Belarus/Kazakhstan/Ukraine should become a victim of an act of aggression or an object of a threat of aggression in which nuclear weapons are used".
  5. Refrain from the use of nuclear arms against Belarus, Kazakhstan and Ukraine.
  6. Consult with one another if questions arise regarding these commitments.”

In the wake of the 2014 annexation of the Crimea by the Russians, and the pusillanimity shown by the other signatories namely the U.S. and the UK in confronting the Russians and holding up their end of the bargain, one wonders if the good people of Ukraine feel betrayed, and that if they could go back in time, would they still opt to lose the nukes?

In the words of Pavel Rizanenko, a member of the Ukraine parliament “We gave up nuclear weapons because of this agreement, now there’s a strong sentiment in Ukraine that we made a big mistake. In the future, no matter how the situation is resolved in Crimea, we need a much stronger Ukraine," he added "If you have nuclear weapons people don't invade you."

He and his fellow citizens are justified in feeling aggrieved about this turn of events. The sad fact is that the annexation of the Crimea had the Russians testing the West’s resolve, and the US, the UK, and the UN were found wanting.

That’s a shame Greg, but a war between the USA and Russia…???

One understands why no one wants two super powers fighting, at-least directly, however it also brings to the fore the fatal weakness in most treaties, especially those that try and limit defense innovation – If both parties to an accord are of commiserate strength, and one of the parties refuses to play along, there is nothing much you can do about it.

Over the last few decades, we have signed numerous treaties, each worded even more intricately than the last, all to ensure the world’s resources are better spent inventing/innovating technological marvels that would aid the betterment of humanity. In return we have been faced by dictator after dictator, government after government, searching for and exploiting loopholes to break the spirit of the agreement.

Take the INP treaty that the Russians have withdrawn from, the 1988 treaty called upon the United States and the Soviet Union to eliminate and permanently forswear all of their nuclear and conventional ground-launched ballistic and cruise missiles with ranges of 500 to 5,500 kilometers. The treaty led to the signatories destroying 2692 short, medium and intermediate range missiles.

Since 2014 the USA has been asking for clarifications amid increasing proof that Russia has violated the treaty by developing and stockpiling missiles in the 500-5000 km range. The Russians, of course, deny any such allegations. In 2018 President Trump drew a red line and acted upon it by formally withdrawing from the treaty.

Why did Russia break its decades old adherence to the INP treaty, and why did the USA withdraw from the space treaty?

China, not party to the treaty, started developing mid-range missiles, forcing Russia to follow suit, and now the west, meaning the USA, has to start work on the same to ensure we don’t fall behind in the race either. The Chinese tested a satellite killing missile recently, years after the US and Russia had shelved any such programs, causing both to now dust off and reopen those programs. The difference here is our formal declaration to do so in both cases, and that having taken five years to do so we are already behind the proverbial 8-ball.

So what’s with the History lesson Greg?

The resurgence of the Russian bear in its old hunting grounds has lain bare how unprepared the west is to take on adversaries in a low intensity conflict based in sub-zero temperatures. While the USA has been concentrating primarily on desert and hot weather warfare over the last couple of decades, an arctic pivot by the Russians has caught the U.S. asleep.

As the Arctic warms up, and new sea routes open up there is an estimated $35 trillion worth of Oil and gas apart from other rare earth minerals up for grabs.

Way back in 2017 the Russians marked their Arctic pivot by setting up a new Arctic command, and allocated 4 new Arctic brigade combat teams, 14 new operational airfields, 16 deep-water ports, and 40 icebreakers with an additional 11 in development. As of December, 2018 the United States had two working icebreakers for the Arctic, one of which is a decade past its use-by date.

It was only in June, 2018 that the US Army sent in a request for Information (RFI) for a ‘Joint All Weather All Support Vehicle’ (JAASV) that can operate in conditions of -50 degrees Fahrenheit. An RFI being the first stage, we can expect an actual vehicle to take at-least three years to hit the ground running.

On the bright side at least the west has woken up to the dangers of ceding the Arctic to the Russians or the Chinese.

Look forward to more defense contracts geared towards cold weather maneuvers, and a resurgent presence of the US in the Arctic.

*Israel has never formally acknowledged possession of nuclear weapons.


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Greg Silberman is the Chief Investment Officer of ACG Investment Management LLC (“ACGIM”). ACGIM specializes in creating custom private market solutions for RIA/Family Office clients.

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